Rent or Buy – The cost of paying for a Home

No matter if you rent or purchase a home, you end up end up paying towards the cost of the home. Depending on your situation there may be advantages for one option over the other.

Mortgages are usually amortizedso that each payment reduces the principal amount owed, so that the loan will be repaid totally over the term. A tenant is basically helping to retire the landlord’s mortgage with the monthly rent. Some experts are saying that we may never again experience the incredibly low mortgage interest rates currently available.

In many cases, the mortgage payment including taxes and insurance will be lower than the rent tenants are paying. That’s not always the case, and there are maintenance and repairs to the home which are additional costs.

Renting usually precludes a person from enjoying the advantage a home has as a leveraged investment. When the borrowed funds cost less than the investment is returning, the rate of return on the down payment grows much faster. As you can see from the chart, a 2% appreciation on a home could result in big returns on the down payment. In most cases, there are very few or no alternative investments that offer homeowners similar returns.

Even if a buyer agrees with all of these things but doesn’t have the down payment or cannot qualify for a loan, they still need to investigate further. To find out exactly what types of loans are available and the specific down payment required which can be a whole lot less than 20%, they need to consult with an experienced, trusted loan professional (an Internet lender or a “BIG” bank may not be the best choice.) Contact us for a recommendation and to get started.